Dingdong Maicai and MissFresh, leading players in China’s burgeoning fresh food delivery arena, filed for US listings on Tuesday, racing to become the first publicly-traded Chinese online grocery platform.
Dingdong Maicai, backed by investors including Sequoia Capital and Tiger Global Management, submitted its prospectus to the US Securities and Exchange Commission on June 8, seeking to launch an IPO on the New York Stock Exchange under the symbol “DDL”. The company plans to sell $100 million worth of shares, according to its filing, although the figure is often merely a placeholder used to calculate filing fees. Morgan Stanley, Bank of America Securities, Credit Suisse and Mission Capital will serve as underwriters of the deal, Dingdong said.
On the same day, Tencent-backed MissFresh filed paperwork to list its shares on the Nasdaq under the symbol “MF,” with investment banks including JP Morgan, Citibank and CICC acting as underwriters for the offering. The firm didn’t reveal a precise target for the financing size, also selecting $100 million as a placeholder number. However, Bloomberg reported that MissFresh could raise anywhere from $500 million to $1 billion in the US listing, citing unnamed sources familiar with the matter.
Dingdong and MissFresh are front-runners in a fierce grocery-delivery battle in China between startups such as Nice Tuan and platforms operated by internet giants like Meituan and Pinduoduo. Last year, Dingdong’s market share in the domestic on-demand e-commerce business reached 10.1%, while MissFresh’s share in China’s on-demand DMW retail industry hit 28%, according to data compiled by CIC and iResearch.
Dingdong’s prospectus suggested that its gross merchandise value (GMV) surged to 13 billion yuan ($2 billion) in 2020 from 742 million yuan ($116 million) in 2018, representing an average annual growth rate of 319.2%. Dingdong reported 11.3 billion yuan ($1.73 billion) in net revenue in 2020.
According to MissFresh’s prospectus, it has established 631 warehouses across 16 cities in China as of March 31. The company’s GMV increased to 7.61 billion yuan ($1.19 billion) in 2020 from 4.7 billion yuan ($735 million) in 2018, for an average annual growth pace of 26.9%. It achieved 6.13 billion yuan ($958.8 million) in net revenue last year.
The two startups are in the process of raising billions of dollars to help angle for a larger piece of the country’s vast and fast-growing online grocery market. Founded in 2017 in Shanghai, Dingdong last month raised $330 million in a Series D+ round of financing led by the SoftBank Vision Fund, bringing its total fundraising to over $1.3 billion. Rival MissFresh has raised at least $1.5 billion since its inception in 2014, valuing the company at about $3 billion.
According to a report by consulting firm iResearch, China’s online grocery market is expected to double to about 820 billion yuan ($128 billion) by 2023 from 458.5 billion yuan ($71.7 billion) last year. Companies in the industry often attract customers by providing heavy subsidies and signing exclusive contracts with suppliers.
The COVID-19 pandemic has also fueled online grocery shopping in China as more people turn to e-commerce platforms to purchase fresh produce and life essentials, due to lockdown measures and public health concerns. Credit Suisse forecasts that Chinese consumers’ virtual grocery spending will reach 4.2 trillion yuan ($656.9 billion) in 2025, up from 0.9 trillion yuan ($140.8 billion) in 2019.